September, 2022

Deep dive: European 2021 Foodtech investments

Europe’s foodtech investments are booming: the estimate is €9.5B in 2021, roughly three times more than 2020. This is according to the report titled “2022 investment, innovation hubs & trends: report on the state of the european  foodtech ecosystem” drawn up by Digital Food Lab in collaboration with Nestlé and Pinduoduo, which gives a detailed overview of the trend in the foodtech sector in Europe, considering investments, innovation hubs and growth categories. In 2021, more than 50% of investments went to startups located in the “European Foodtech Hub” region, which includes Germany, the United Kingdom, France, the Netherlands, and the Nordic countries.

Let’s take a step back: what does foodtech mean?

Foodtech is the ecosystem consisting of startups in the agribusiness sector-from production to distribution-that innovate on products, distribution, marketing or business models, and act by offering solutions to some of today’s big issues, such as climate change, health and strategic autonomy.

This sector is growing strongly, not only because of an economic interest and technological innovation, but also because it is pushed by certain drivers given by consumers, such as the desire to change their diets to a more plant-based model, or the desire to better support the companies that are more committed to sustainability and environmental protection.

According to the report, there are six main categories in the Foodtech field: Agtech, Food Science, Food Service, Delivery and Supply Chain, and Consumer Tech. Total investments in all categories reached €9M in 2021. In the following section we will explore the three major areas of investment, that is, Food Science, Agtech, and Food Service.

Agtech, Food Science and Service on the rise

From new technologies and ingredients for feed and pet food, to the development of alternative proteins, to the deployment of new food service businesses; these are the main areas of investment in Europe within foodtech, according to the report.

Food Science is the largest investment category, counting €950M in year 2021 only. This category includes all those startups that are innovating the food ingredients sector, looking at new sources and technologies. An example of investment in this area is PepsiCo in the startup that “transforms the taste of water” without the use of sugars or additives, Air Up.  The Food Science category mainly includes the alternative protein sector, with €470M of investment raised in 2021, which covers all those startups developing plant-based, fermentation and cellular agriculture alternative protein products or ingredients. This sector has experienced exponential growth, but investments in the coming years should be focused on purchasing facilities and equipment to make new technologies sustainable and scalable. The area of startups developing Consumer packaged goods (CPG) products is also expanding, with €333M raised in 2021, focusing on innovation of existing products, the concept of transparency and clean label, but also the focus on sustainability and personalization of products on the consumer. Finally, the sector related to the development of functional ingredients (€178M) is also expanding, with the development of new ingredients that add functionality to products, becoming a very important segment to support the so-called protein transformation, improving products containing alternative proteins.

The second Foodtech area with the largest investments in Europe is the one related to AgTech, with €860M in 2021. Major investments include BASF’s in the startup dedicated to farm robotics, Ecorobotix. Within AgTech, it is the Urban and Novel Farm, consisting of startups that develop urban indoor farms to shorten the distance between food production and consumption, that has gathered the most investment, about €435M in 2021. This is followed by the Ag-Biotech sector, with €269M, which is expanding and led mainly by startups aiming to develop new insect-based ingredients, particularly for animal feed, or pet food. The sector related to new technologies and software that assist farmers in managing, organizing, and optimizing all activities on their farms is also on the rise, making the sector much more competitive than in previous years.

Finally, among the most relevant categories for investment in Europe we can mention the Food Service, meaning startups that offer services to improve the restaurant industry, which in 2021 counts about €851M of investment. Services dedicated to payment methods in restaurants is the sector that in the Food Service field has raised the most investments, around €334M in 2021. However, services to improve restaurant management are also growing, with €310M in 2021, and include all the startups that offer solutions to improve online presence, marketing, raw material procurement, inventory and warehouse management, as well as customer feedback collection of the restaurant business.

These are the Foodtech categories that were most relevant in Europe in 2021, representing a clear picture of the future trend. On one hand, the focus on sustainability and food issues that is represented by the desire to have a healthier and more environmentally friendly food throughout the production and sourcing process; on the other hand, the increasing development of new digital technologies, both to be applied in the agricultural sector to achieve more and more improvement in performance, decision-making and management of its business, and to provide the consumer with a faster, more efficient and user-friendly service, allowing payments and the use of food services with a simple click.